This study examines bid-ask spreads in the stock market around the introduction of the Standard and Poor's (S&P) 500 index futures contract and tests the following competing hypotheses: (1) stock spreads may widen as uninformed traders migrate to futures and (2) spreads may narrow because specialists can hedge better. The authors' analysis suggests that, after controlling for changes in other spread determinants, average spreads of S&P 500 stocks increased significantly. Though an additional test suggests an increase in the adverse-selection component of the spread in the postfutures period, this increase is not reliably different from zero. Copyright 1993 by University of Chicago Press.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 66 (1993) Issue (Month): 2 (April) Pages: 171-87 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF